BY OMAR RIDZUAN
KUALA LUMPUR — After 20 days of intense political wrangling, members of Parliament on last Thursday finally approved Budget 2021.
Among the many highlights contained in Budget 2021, is the taxation on the vape industry, to follow suit the tobacco industry.
For the first time ever, vape devices, as well as its liquids, will be taxed similar to the tobacco industry.
However, the vaping industry is taxed much lower than the tobacco industry despite its high revenue potential. There is an increasing number of people in the world who smoke today, opting to the vaping.
‘‘The proposed tax value for vape industry is far from what the Government imposed on the tobacco industry,” said MQ Consultant, a local research and technology company that engaged in-depth study on vape economics and industry in Malaysia.
“Taxing is one of the first important steps to regulate the growing vape economy (Malaysia is estimated to be the second-largest vape market in the world, after the United States), and with different dynamics compared to cigarette economics, a careful study on the tax structure is needed. We can’t use a blanket method to cover it all,” added MQ Consultant in a statement here today (29 November).
In presenting 2021 Budget recently, Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz said an excise duty of 40 sen per millilitre on an electronic cigarette will be imposed on January 2021.
Globally, Malaysia was late to impose the tax system on e-cigarettes but efforts is on the way to help regulating and leap-frog the industry in a proper manner.
In Asia, Indonesia, the Philippines and Korea introduced the tax on e-cigarettes in 2011 and the majority of these countries imposed a much higher tax than Malaysia.
At this time, Malaysia plans to impose a tax of US$0.10 (40 sen) per millilitre; while in the Philippines, the tax has been set at US$0.76 per millilitre.
This is also a disadvantage for the country. The Malaysian government should also increase the tax for all vape liquids.
And, tax can be used as part of a control measure towards this new form of habit.
As a comparison, the vaping liquid (except for pre-filled pods) in Indonesia is taxed as high as 57 per cent, more than four times the maximum excise on regular cigarettes.
“Issues related to vape culture is a pattern that Malaysian Government should study carefully and the idea of imposing higher tax rate could potentially be seen as a positive preventive measure, instead of a draconian move.”
Despite a few isolated cases around the world, there is a strong consensus among researchers that vaping is a much healthier alternative compared to smoking cigarettes”
MQ Consultant also said that with the help of data and research that is actively being compiled locally and internationally, Malaysian Government could take advantage by using vaping as a tool to help the public in transforming into a possible smoke-free society.
“This effort is not an experimental idea as it has been adopted by the New Zealand Government as a tool to achieve their goal; to become a smoke-free nation in 2025.”
Meanwhile, an independent survey estimated that there are three million e-cigarette users in Malaysia currently.
Although the vape industry in Malaysia, is projected to be worth billions of ringgits, it is still a black economy resulting in a huge loss of potential revenue for the government. In relation to the rapid increase of vape users and the declining number of smokers, the country could not afford to be left caught unprepared for the global habit transition.
With a tax regulation in place, Malaysia can finally design a win-win situation that will not only contribute to the country’s economy but also will benefit the government effort in improving Malaysian social and health status in the long term.